Tesla (NASDAQ:TSLA) appears immune to the stock selloff. Despite reporting paltry revenue growth of ~2% year-on-year, the stock enjoyed the $640 level after the earnings report. Markets liked many data points the EV giant posted in its quarterly report. Sadly, gas-powered car makers like GM (NYSE:GM) and Ford (NYSE:F) are out of favor, while betting against Tesla’s run-up seems foolish.
Tesla posted earnings of $2.14 (non-GAAP) and GAAP earnings of just $0.58. The difference is due to Tesla excluding over $300 million in quarterly stock-based compensation. Regardless, investors are confident that the Gigafactory opening in China will lower costs and grow profit margin.
Tesla said its annual unit production will exceed over 500,000 units. It said the Model Y crossover SUV, a hot segment in automotive, will be launched earlier than expected.
Slow Revenue Growth
Tesla’s unit sales increased sharply but revenue rose by just 2.2%. Model 3 is hurting the total but is a necessary short-term headwind on profits. Gross margins, which fell from 24.3% to 22.5% may or may not improve. If Tesla’s component costs fall and output from the China factory increases, profits just might improve.
Your Takeaway
Value investors will suffer from holding GM and Ford stock while watching Tesla fly higher. This trend will not change for a while. With 18% of Tesla’s stock float short-sold, the squeeze may continue for longer.
Disclosure: the author owns Ford shares.
Tech Insider
